The furthest warehouse wins

With their inherent lead-time disadvantage compared with local manufacturers, importers are under growing pressure to cut logistics costs while reducing lead times and improving reactivity.

Supply chains account for 10% to 20% of most organisations’ total costs, 50% of which comprise transportation costs. To justify importation over local manufacture, the cost (plus inbound logistics costs) must be considerably less than the cost of local manufacture.

Cutting costs, import lead times, delays, handling and paperwork

The status quo
Traditionally, import logistics sees most goods sent to the ‘port of Johannesburg’ for clearing, or goods are cleared in Durban and sent to central warehouses in Johannesburg – before line-hauling a good proportion back across the country (often back to Durban, or to Cape Town or Bloemfontein). This leads to an unnecessary increase in transportation costs, double handling and increased lead times, all of which reduces the competitive advantage of importers.

The purpose of keeping inventory is to mitigate the risk of demand volatility, and to increase service levels. But investing capital in warehouses of fixed size and location, and holding inventory anywhere but at the port of entry leaves you more exposed to demand and market volatility than you need to be, and simply adds lead time and cost to the logistics system. Large retailer-importers have known this for some time. It’s why importers are increasingly opting for inventory to be stored near the port of import – usually Durban.

Port-based warehousing
This solution can shave as much as 20% off total transportation costs, and saves the importer two weeks of lead time, drastically reducing both inventory holding costs and the working capital required to be invested in inventory.

Of course this solution depends on the availability of an efficient distribution system that operates from the port and distributes goods anywhere in the country at short notice. And this is where the revolution provided by logistics provider Crossroads, who own courier and express parcel business SkyNet, comes into its own.

Modern logistics suppliers who have express parcel capability built into their DNA are at an advantage. The Crossroads group for example distributes parcels to 450 towns in South Africa daily through an invested infrastructure in SkyNet, which has 35 cross-docking hubs and 800 vehicles. Moving parcels anywhere in South Africa within 24 or 48 hours is their standard fare.

Leading supply chain managers are already adapting by opting for either shared or dedicated warehousing at the port – a solution at once reliable, cost-efficient and flexible. The greater visibility and reactivity of an express delivery system transforms the reorganised logistics function into the strategic cornerstone of a more agile supply chain.

An obvious partner
Reducing lead times is crucial in order to react with speed to volatile shifts in demand. Specialist logistics and supply chain services provider Crossroads is shaking things up with a new integrated distribution methodology that enables its customers to generate bottom line value and hone their competitive edge.

Crossroads’ ability to offer bundled logistics solutions, that match the unique requirements of importers, is enabled by their invested warehousing and cross-docking capacity. They also manage the country’s biggest scheduled line-haul operation. Their fleet of 800 last-mile delivery vehicles ensures they can reach destinations in 450 towns nationwide on a daily basis.

Crossroads’ unique distribution skills can be supplemented by its kitting capabilities. The company can pick and pack, price and label goods at its port-based warehouses… increasing speed to market, reactivity, visibility and service levels while reducing working and fixed capital as well as costs.

It sounds too good to be true, but it’s not. It’s simply an innovative solution that recognises the challenges of our time, and applies the DNA of a courier business to the challenge of the distribution of parcels.

 
© Copyright Crossroads 2014